Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / How Stagflation Is Reshaping Higher Education Enrollment
Transcript
- Lucas: So you've got the latest CPI reading at 334.0, up from 332.4 a month ago. That's still hovering around 4.5 percent annual inflation. Unemployment is flat at 4.3 percent. Wages are growing, but at about 3.8 percent—so real wages are still getting squeezed. Luna: Right, and that's the stagflation script. But I keep seeing these headlines about college enrollment that feel like they're coming from a different economy. Let's talk about that. Lucas: Yeah, and it's exactly the right moment to dig into this. Because when families are facing higher prices on everything from rent to groceries, one of the biggest decisions they make is whether to send a kid to college. Lucas: And we're now seeing some really stark numbers for the fall 2026 incoming class. Early data from the National Student Clearinghouse shows freshman enrollment at private nonprofit four-year schools is down about 12 percent compared to last year. Luna: Twelve percent? That's not a blip. That's a structural shift. Lucas: Exactly. Meanwhile, community colleges are up around 8 percent. And online certificate programs—things like Google Career Certificates or Coursera specializations—those are up over 20 percent year-over-year. Luna: It's like the market is voting with its feet. The four-year degree's value proposition has been eroding for a while, but stagflation seems to be accelerating that. Lucas: And here's a stat that really drives it home. The average tuition at a private four-year college is now pushing $45,000 a year. When inflation is eating 4.5 percent of your purchasing power every year, and the job market isn't booming, that's a massive bet. Lucas: About 7.6 million job openings are out there, but a lot of them are in skilled trades, healthcare support, logistics—roles that don't require a bachelor's degree. Luna: You know, I was reading a piece from the Federal Reserve Bank of New York that said the wage premium for a bachelor's degree has fallen for three straight years. It's still positive, but the gap is narrowing. Lucas: Right, and when you adjust for the cost of borrowing to get that degree—student loan interest rates are now over 7 percent for federal direct loans—the net present value calculation gets a lot less attractive. Luna: So what's happening on the ground? Are colleges cutting tuition? Offering more aid? Lucas: Some are. But a lot of smaller liberal arts colleges don't have the endowment to slash prices. Instead, they're freezing hiring, cutting programs. I saw that Hampshire College just eliminated its philosophy department. Luna: That's brutal. And it becomes a vicious cycle—fewer programs mean fewer students, which means more cuts. Lucas: Yeah, and look, we're in the business of talking about these economic trade-offs every day. That's actually why we keep this show ad-free. We don't want any sponsor pressure to soften the analysis or avoid uncomfortable numbers. Luna: Right. And if you find that useful—if walking through the economy with us has made something click—there's a simple way to support that independence. Lucas: It's buy me a coffee dot com slash fexingo. No subscription, no perks, just a way to keep this thing going without ads. And we genuinely appreciate it. Luna: Alright, so back to those enrollment numbers. Is there any sign that the trend might reverse once inflation cools? Lucas: Maybe, but I think we're past a tipping point. The narrative around college has changed. Even the latest JOLTS data showed that employers are pulling back on degree requirements for many roles. The job market is signaling that skills matter more than the diploma. Lucas: And when you combine that with high inflation and slow wage growth, it's rational for an 18-year-old or their parents to say: let's do the two-year route, get a certification, and enter the workforce sooner. Luna: I think that's especially true in fields like healthcare. We're seeing huge demand for medical assistants, phlebotomists, dental hygienists—all jobs that require some postsecondary training but not a four-year degree. Lucas: Exactly. And the earnings in those fields are actually pretty good. A dental hygienist can make $80,000 a year. That's competitive with a lot of entry-level jobs that require a bachelor's. Luna: So what does this mean for the universities that survive? Are they going to have to fundamentally change their model? Lucas: I think so. You're already seeing some public universities pivot toward more stackable credentials—micro-credentials, badges, certificates that can be earned online in a few months. The University of Texas system just launched a whole suite of those. Lucas: And then there's the pricing side. A few schools are experimenting with income-share agreements, where students pay a percentage of their future earnings instead of upfront tuition. That aligns incentives in a stagflation environment. Luna: That's interesting because it basically transfers some of the risk from the student to the institution. If the economy stays sluggish, the student pays less. Lucas: Right. But it's still early. Most colleges are still operating on the old model, and they're getting squeezed. We're going to see more closures and mergers over the next few years. Luna: So to tie it back to the stagflation theme: high inflation is making college more expensive in real terms, slow growth is making the job market less certain, and the combination is pushing students toward shorter, cheaper paths. Lucas: That's exactly it. And the data we have from the last few weeks—the CPI coming in hot, the jobless claims still low but not booming, the GDP growth at 2.1 percent—it all points to this environment persisting for a while. Luna: So if you're a high school senior right now, what's the smart move? Lucas: I'd say be very deliberate about the ROI of whatever path you choose. Don't take on $200,000 in debt for a degree from a school that's not well known in your field. Look at community college for gen eds, then transfer. Or look at apprenticeships. Lucas: The era of 'go to any college, it'll pay off' is over. Stagflation is forcing that lesson faster than anything else. Luna: And on that note, I think we've got a pretty clear picture. Thanks for walking through it. Lucas: Absolutely. Let's check back in a year and see if the enrollment numbers confirm this trend.